BHC's Producer Insights
"SEC was Arbitrary & Capricious"

  

For Immediate Release
Houston, Texas

We've been waiting two years to find out whether or not index-linked fixed annuities will be classified as securities in accordance with the SEC's proposed Rule 151(A). The SEC was sued by a coalition of insurance companies and two independent marketing companies, one of which was BHC Marketing, to have the proposed Rule invalidated. The court's ruling was delivered July 21st and the news is good: the court has ruled that the SEC acted arbitrarily and capriciously and has remanded Rule 151(A) back to the SEC for more rigorous justification of its effects on competition, efficiency and capital formation. Before you declare victory, know that the court's ruling simply allows us to continue the fight another day. The SEC has several options including:

  1. Fixing the problems and asking the court for a favorable ruling;
  2. Appealing to the U.S. Supreme Court in hope of getting a more favorable ruling;
  3. Withdrawing the Rule;
  4. Doing nothing and keeping us in suspense. Regardless of their response, it seems likely that Rule 151(A) will be implemented later, if ever, than the proposed January 2011.
Given the other problems of the SEC – Madoff, Sanford, financial meltdown of Wall Street and more – it would be logical for them to move on to more important matters. Additionally, those opposing the SEC Rule have successfully lobbied to get legislation sponsored in the U.S. House and Senate to negate 151(A) regardless of how the courts eventually rule. If the SEC wishes to safeguard the powers and jurisdictions they now possess, but which are under attack, now is not the time to butt heads with Congress. The SEC has bigger issues that should remove Rule 151(A) from their front burner.

In the meantime, do not rush to the nearest FINRA testing center and take a licensing examination – unless you want to sell securities and collect brokerage commissions. Also, you can postpone your plans to become a Registered Investment Advisor ("RIA") or Investment Advisor Representative (“IAR”). Nonetheless, if you want to talk about securities or give investment advice for a fee, you would be well advised to consider becoming a RIA. If you elect instead to become an IAR and join a RIA firm, you will be subject to the rules imposed by the RIA just as you would be if affiliated with a broker-dealer. Accordingly, if you aspire to be free to elect what products and services you offer clients, establish your own RIA rather than becoming an IAR. The licensing requirements are the same and the costs similar. Why be captive when you can be independent?

The state of our business continues to be outstanding. The retirement-minded, still stinging from massive market losses, are putting distance between them and the risks of the market by choosing safer options. Those turning to the safety of bank CDs are finding depressing interest rates that assure a loss of purchasing power with the slightest inflation, especially after the expected higher taxes on the earnings. One safe harbor is fixed annuities – including the index-linked variety – that offers guaranteed lifetime income benefits. It is shameful how securities brokers are now openly offering fixed annuities after all their years of disparaging them. The necessity, of course, arises from the lack of demand for securities that have suffered massive market losses.

It is a great time to be in the fixed annuity business, because the retirement-minded see the benefits that recent history has substantiated. If we could now rein in the AARP and their corps of senior seminar monitors, the state securities commissioners, FINRA and the uninformed personal investment columnist, annuities could fully enjoy the respectability deserved. The outlook is somewhat clouded by insurance carriers rationing annuity business due to shrinking reserves; thus, formulate a Plan B to assure continued access to several annuity carriers through an independent marketing company like BHC.

Shelby J. Smith, Ph.D.
July 2009  

« PREVIOUS ISSUES »

« SUBSCRIPTION PAGE »


BHC Marketing has annuity sales systems that work. PLUS our generous incentive programs can pay all the associated costs. If this interests you, call us or visit us online. BHC offers all the primary carriers, pays the highest commissions allowed, has a vast menu of business building programs and a staff of seasoned professionals to give you the service and support you expect and deserve. We also provide FREE leads and referrals provided by www.TheRetirementPros.com. You have choices and BHC is worth a look: visit online at www.bhcmarketing.com.


Cannot be distributed to the general public without the written permission of BHC Marketing
1585 Sawdust Rd, The Woodlands, TX 77380 (800.201.0224)
All Rights Reserved, BHC Marketing.